EPF & Superannuation benefits withdrawals built in from 1st April 2016 taxable

Provident Fund Withdrawals To Be Taxed In Big Setback For Salaried Class

NDTV Profit Team | Last Updated: February 29, 2016 15:19 (IST)



Budget 2016 proposes to tax part of Employee Provident Fund (EPF)
withdrawals from April 1, 2016, a move that will disappoint nearly six
crore people.

"In case of superannuation funds and recognized provident funds,
including EPF, the same norm of 40 per cent of corpus to be tax free
will apply in respect of corpus created out of contributions made on
or from 1.4.2016," said Finance Minister Arun Jaitley in his budget
speech.

Currently, withdrawals from Employee Provident Fund are completely
exempt from income tax after five years of continuous service, but
once the new measure kicks in, employees will have to pay income tax
on 60 per cent of withdrawal amount from EPF. The remaining 40 per
cent will be tax free, experts told NDTV Profit.

The tax on EPF withdrawal will be charged according to tax slab of the
employees, analysts say.

EPFO manages a corpus of around Rs. 6.5 lakh crore with a subscribers
base of around six crore.

"This has been done with the aim of aligning the tax treatment of
long-term retirement products... it will be applicable to
contributions made after 1 April 2016," says Parizad Sirwalla,
National Head-Global Mobility Services-Tax, KPMG.

Analysts say that the move is aimed at encouraging the salaried class
to remain invested in the retirement fund and later on invest the
kitty in annuity (pension) products to earn regular income.

The finance minister also announced that investors in the New Pension
Scheme (NPS) will be extended the same tax treatment as EPF.  This
means that withdrawals from NPS, which came under the ambit of income
tax, will be partially tax free. So, 60 per cent of NPS withdrawal
will be taxed, while the remaining would be tax free from April 1,
2016.

Story first published on: February 29, 2016 14:44 (IST)"

Greetings.
CH Mahadevan